{"id":25954,"date":"2024-09-25T23:19:46","date_gmt":"2024-09-25T23:19:46","guid":{"rendered":"https:\/\/www.psoda.com\/global\/?p=25954"},"modified":"2024-09-25T23:19:46","modified_gmt":"2024-09-25T23:19:46","slug":"the-risk-trifecta-aligning-organisational-portfolio-and-project-risk-management","status":"publish","type":"post","link":"https:\/\/www.psoda.com\/global\/2024\/09\/25\/the-risk-trifecta-aligning-organisational-portfolio-and-project-risk-management\/","title":{"rendered":"The Risk Trifecta \u2013 Aligning Organisational, Portfolio and Project Risk Management"},"content":{"rendered":"

The world is experiencing the most turbulent times since the 2007 – 2008 Global Financial Crisis<\/a>. From market volatility<\/a> and technological disruptions to ongoing conflicts and climate change, the challenges for organisations are numerous<\/a>.<\/p>\n

As a result, organisations are increasingly looking at ways to proactively prepare for and mitigate risks. It\u2019s no longer enough to manage risks in silos or have different systems and methodologies for different areas of the business. There needs to be a cohesive risk ecosystem that integrates across the entire organisation.<\/p>\n

When creating a comprehensive organisation wide risk management framework to align organisational, portfolio and project risk management there are three key components to consider: Integrated Risk Management (IRM), Project Portfolio Risk Management (PPRM) and Project Risk Management (PRM).<\/p>\n

Integrated Risk Management<\/strong><\/span><\/h2>\n

Integrated Risk Management (IRM) is designed to manage risk across the entire organisation. It covers all types of risk including strategic, operational, financial and compliance and how they interrelate with each other. The purpose of IRM is to provide a comprehensive overview of the risk profile of the organisation to allow the C-suite to make informed decisions.<\/p>\n

IRM typically involves:<\/p>\n

    \n
  1. A top-down approach that aligns risk management with strategic objectives<\/li>\n
  2. Cross-functional collaboration to identify and manage interdependent risks<\/li>\n
  3. Standardised risk assessment methodologies and metrics<\/li>\n
  4. Continuous monitoring and reporting of risks across the organisation<\/li>\n<\/ol>\n

    Project Portfolio Risk Management<\/strong><\/span><\/h2>\n

    Project Portfolio Risk Management (PPRM) is below IRM in the hierarchy and specifically focuses on identifying and managing risks within an organisation\u2019s portfolio of projects. The aim is to balance risk across the portfolio and ensure the portfolio outcomes align with the organisation\u2019s strategy.<\/p>\n

    PPRM typically involves:<\/p>\n

      \n
    1. Aggregating risks from individual projects and programmes<\/li>\n
    2. Assessing the cumulative impact of these risks on the portfolio<\/li>\n
    3. Prioritising projects based on their risk-reward profiles<\/li>\n
    4. Managing interdependencies between projects within the portfolio<\/li>\n<\/ol>\n

      Project Risk Management<\/strong><\/span><\/h2>\n

      Project Risk Management (PRM) focuses on identifying, managing and reporting on risks throughout the lifecycle of individual projects. PRM is an integral part of project management.<\/p>\n

      PRM typically involves:<\/p>\n

        \n
      1. Identifying potential risks specific to the project<\/li>\n
      2. Analysing the probability and potential impact of these risks<\/li>\n
      3. Developing response strategies for each significant risk<\/li>\n
      4. Monitoring and controlling risks throughout the project lifecycle<\/li>\n
      5. Balancing threats (negative risks) with opportunities (positive risks)<\/li>\n<\/ol>\n

        Integration of Integrated Risk Management, Portfolio Project Risk Management and Project Risk Management<\/strong><\/span><\/h2>\n

        While the three components work at different levels in the organisation it\u2019s important that they work together to create a cohesive, organisational wide, risk management system.<\/p>\n

        Hierarchical risk structure<\/strong><\/span><\/h3>\n

        IRM provides the overarching framework that PPRM and PRM operates within. This creates a clear hierarchy of risks, from strategic organisational risks down to individual project risks. This structure allows for better risk categorisation and management at appropriate levels.<\/p>\n

        Multidirectional Risk Flow<\/strong><\/span><\/h3>\n

        Integrating IRM, PPRM and PRM ensures a multi-directional flow of risk information:<\/p>\n